ISLAMABAD: Preparation of the economic survey for the current fiscal year - based on the usual practice of basing projections for the entire year on nine month data - is underway, but with the continued worsening Covid-19 fallout (commencing from the tenth month) on key macroeconomic indicators would have made any earlier projections unrealistic.
"We are going to take some data available till May," stated a Ministry of Finance official, adding that GDP growth has been estimated at 0.38 percent negative provisionally for the current year as announced subsequent to the National Accounts Committee (NAC) meeting held on May 19, 2020 - a projection (-) 1.12 percent lower than the International Monetary Fund (IMF) projection of (-) 1.15 percent.
The IMF made this projection in Rapid Financing Instrument (RFI) documents dated 17 April, 2020 maintaining that the Pakistan economy is "buffeted by demand and supply shocks following Covid -19."
The NAC projected agriculture sector growth rate of 2.67 per cent (though data revealed by the relevant authorities have estimated a growth rate of 2.5 percent against the original target of 3.5 percent), industrial sector at -2.64 percent (with the 15 May 2020 Monetary Policy Statement giving the Large Scale Manufacturing sector growth rate at negative 23 per cent year on year in March 2020) and services sector's growth rate at (-) 0.59 per cent (with services trade deficit projected at negative 33 per cent July-April 2019-20) .
An official on condition of anonymity said that provisional estimates of GDP growth for the current fiscal year appear to be unrealistic as all the economic indicators are pointing towards further slide in growth; however, officially the finance ministry has claimed otherwise.
The official added that the actual impact of Covid-19 on the economy during April-June 2020 would be noted by the NAC a year later as it meets only once a year, prior to the budget announcement.
The official further revealed that the Public Sector Development Programme (PSDP) disbursement is not visible after March 2020, adding that the Economic Survey will take account of the fact that large scale manufacturing has registered negative growth rate backed by automobile sector as well as others long before the Covid-19 stifled economic activity still further.
According to the official economic indicators updated till May 28, 2020 include the following: (i) LSM recorded a negative growth of 0.21 per cent in February 2020 over the same period a year before and 22.95 per cent negative in March 2020 over March 2019. Overall growth of LSM has been negative by 5.40 per cent during July-March 2020 compared to same period of last fiscal year; consumption and production of petroleum production also declined sharply from March 2020 onwards as a result of lockdown in the country; and (ii) wheat crop is feared to suffer due to untimely rains.
According to economic update of the ministry of finance website the corona virus pandemic has been impacting on all sectors of the economy and Pakistan's business sentiment has started to plummet. Manufacturing sector witnessed very sharp deterioration in business sentiments across all sectors. Pakistan's domestic production and exports have suffered due to less supply of intermediate goods, decrease in global demand and commodity prices.
Exports witnessed a decline of 2.4 percent in July-April 2020 compared to same period of last fiscal year and imports by 16.9 percent. The federal PSDP spending during July-March 2020 has been Rs 417 billion including grants to the provinces; credit to the private sector (flows), another indicator that reflects business sentiments, has declined to Rs 298 billion during July May 2020 from Rs 563.1 billion for the same period a year before. Total credit disbursement has decreased to Rs 187 billion during July-April 2020 from Rs 533 billion for the same period of last fiscal year.
Working capital, according to monthly economic update also declined to Rs 28.8 billion during July-April 2020 from Rs 345.6 billion for the same period of last fiscal year and fixed investment was negative Rs 5.2 billion from Rs 85.2 billion the year before. Market capitalization was also down by 6.10 percent in rupee terms and 7.66 percent in dollar terms in May 20 2020 from what it was on 1 July, 2020.
However, according to economic update the current account deficit gap reduced to $3.3 billion during July-April 2020 from $11.4 billion for the same period in 2019, reflecting a contraction of 70.8 per cent. The Ministry claims that there was an increase in foreign direct investment (FDI) of 91.7 percent in March 2020 over the same month a year before with FDI inflows increasing from $145.4 million to $278.7 million while in April 2020 increase in FDI was 32.1 percent as opposed to same month of last fiscal year.
The fiscal deficit has been reduced to 3.8% during July-March 2020 from 5.0% last year due to a sharp rise in non-tax revenues and significant improvement in provincial surplus. Within revenues, non-tax rebounded during the first nine months of current fiscal year on account of substantial rise in profits by State Bank of Pakistan and PTA. All provinces posted a cumulative surplus of Rs 394.1 billion during July March 2020 compared to Rs 291.6 billion last year.
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